Faulty ERP App Results in Shortfall for Medical Firm

Problems with rolling out a set of Oracle Corp. ERP application modules have caused Invacare Corp. to take a hard financial hit; the company expects to report a fourth-quarter revenue shortfall of about $30 million.

The Elyria, Ohio-based maker of home medical products blamed start-up problems with order-to-cash application modules for the financial woes in the quarter that ended Dec. 31. The modules let a company receive an order, allocate supplies to build it and provide customer access to order status.

Invacare has successfully implemented other Oracle applications since the $20 million ERP effort started four years ago, officials said. In a statement, Invacare blamed the financial problems on an "extensive but temporary" disruption of order-to-cash processes and "inefficiencies" during the recent implementation of the modules. As a result, Invacare cut its fourth-quarter revenue estimate to between $370 million and $380 million and its estimated earnings per share from between 55 cents and 70 cents to 30 cents to 40 cents.

The ERP project set out to replace a number of homegrown systems with Oracle's software, according to an Invacare spokesman. Last fall, Invacare went live with the order-to-cash system and soon faced several problems, the spokesman said. For example, call center personnel were unable to respond quickly to customer queries or to share with them information about their order status. The software also caused the company to miss shipment deadlines, he said.

"We never expected it to be perfect, but we didn't expect the magnitude of issues we experienced," said the spokesman, who declined to say what caused the problems. "We're still working with the challenges," he said. "We haven't pulled together all the lessons learned yet, but we should have done more testing than we did."

The software problems forced Invacare to spend money on overtime for workers in manufacturing, distribution and customer service operations. The company was also required to spend extra money to expedite customer orders and had to process a higher-than-normal level of returns.